Companies Act For Entrepreneu

What are the characteristics of a
company ?
Common seal
legal identity
artificial person
perpetual succession
right to sue and be sued
5 DECEMBER 09 www.afterschool.tk 1
What is corporate veil?
A company is different from its members.

There is a veil between company and its
members
When can the court lift corporate
veil ?
When there is a possibility of fraud / tax avoidance /
illegal work / government revenue escape etc.
When company violates rules / law / procedures
When company is a sham
when comapany has been formed to avoid one's
contractual liabilities
When company is agent of its shareholders
when company has been created against public interest /
for vested interest
What are the types of companies
on the basis of liability ?
Limited liability company

unlimited liability company
Limited by guarantee company
on the basis of control ?
Holding company
subsidiary company
on the basis of ownership ?
Private company
Public company
government company
foreign company
on the basis of incorporation ?
Chartered company (which used to work in
pre-independence India having charter from
Britain)
statutory company (created by an act of
parliament)
registered company (ordinary company,
registered under companies act)
What are the privileges of a private company
in comparison to public company ?
They can start with only 2 members (sec 12))
It can allot shares without minimum subscription (Sec. 69)
No need of prospectus / statement in lieu of prospectus
(sec.70)
No requirement of rights issue in case of next issue (sec.
81)
No need of certificate of commencement of busienss, it
can start just after incorporation (sec 148)
What are the privileges of a private company
in comparison to public company ?
It can work with only 2 directors (sec. 252)

No need of statutory meeting and statutory
report (Sec. 165)
No need to keep index of members (sec 151)
No restriction on managerial remuneration
Rules regarding directors are less stringent
When will a private company
convert into a public company ?
By Mistake -
if it gives public invitation for its shares
if its members increase beyond 50
etc.
(sec. 43)
Company law board may pardon the mistake
When at least 25% of its capital is with public company /
public companies
Average annual turnover over Rs 10 crores
When a private company holds at least 25% shares of a
public company
when a private company accepts public deposit
(sec. 43A - in all these cases, it will become deemed
public company)
By CHOICE
A private company can change its articles and
become public company and file a
prospectus with registrar in 30 days of
conversion
(read sec. 44)
How will a public company
convert into a private company ?
It is more difficult
1. special resolution
2. permission of govt.
3. in 1 month new copy of articles have to be
submitted
What is the difference between
private and public company?
• PRIVATE • PUBLIC
• Only 2 directors can • Min. 3 directors can
start start
• Cant transfer shares • Can transfer shares
freely freely
• No prospecus / • prospecus / statutory
statutory meeting meeting essential
• Min 2 max 50 • Min 7 max – no limit
members on members
What are the documents which
promotors prepare before starting
a company ?
1 memorandum of association
2 articles of association
3. prospectus
4 preliminary contracts
5. underwriting contracts
6 contracts with lead banker / lead manager /
manager to issue
How to pick up name of the
company ?
Check availability of name

(name should not be similar to existing
company and should not be restricted) (sec.
20)
How to apply for a Name?
First check out availability of name on the

website :
http://www.mca.gov.in/DCAPortalWeb/dca/
compName.do
Submit the filled in Form-1A along with the
application fee of Rs.500/- at the cash
counter of RoC or send the application and
5 DECEMBER 09 DD by post.
www.afterschool.tk 17
Hwo to get name approved ?
You can apply for a name in the prescribed

form (Form-1A) along with the application
fees (Rs.500/-) at the RoC. You can give a
maximum of 4(four) names in order of
preference in your name application.
RoC=registrar of companies
What after name is approved?
After getting the name approved, prepare the
necessary documents for registration of the
company and file the same at RoC along
with the registration and filing fees.
Registration and filing fees vary depending
upon the Authorised capital. In addition,
Memorandum of Association and Articles of
Association and Form-1 require payment of
stamp duty as per concerned state stamp act.
What is the validity period of the
the approved name is valid for a period of 6
Name approved?
months from the date of approval. The
Applicant can renew the name within 6
months by submitting a fresh Name
application (Form-1A) along with the fees of
Rs.500/-, by mentioning that the application
is for renewal of the name already approved.
( Names inadvertently allowed or which are
against the guidelines, which have
subsequently come to the notice, may be
withdrawn
5 DECEMBER 09 bywww.afterschool.tk
the RoC before or after 20
What is the minimum Authorised
Capital for a company?
The minimum authorised capital for Private

Limited Company – Rs.1,00,000/-
For Public Limited Company – Rs.5,00,000/-
What is the minimum number of
directors required to form a
company?
Minimum no. of directors for Private Limited

Company – Two.
For Public Limited Company – Three.
subscribers required for
registration of a company?
Minimum no. of subscribers for Private

Limited Company – Two.
For Public Limited Company – Seven.
What is the minimum Paid-up
Capital at the time of registration
of a company?
The minimum paid up capital for Private

Limited Company – Rs.1,00,000/-
For Public Limited Company – Rs.5,00,000/-
shares to be subscribed at the time
of incorporation?
Minimum subscription for Private Limited

Company – Shares worth Rs. One lakh.
Minimum subscription for Public Limited
Company – Shares worth Rs. Five Lakhs.
Authorised capital and Paid-up
capital?
Authorised capital is the capital with which the

company is registered. The company can
issue shares up to the level of Authorised
Capital. Paid up capital means the amount of
capital actually paid by the shareholders in
respect of shares allotted to them.
Where can the company under the
Companies Act, 1956 be
registered?
The Company can be registered with the

Registrar of Companies of the state under
whose jurisdiction the proposed company’s
registered office will be situated
What are the documents to be
filed with RoC every year?
Invariably, the Balance Sheet and Annual
Return have to be filed every year. Other
documents such as, Return of Allotment
(Form-2), Change of Registered office
(Form-18), Change among the Directors
(Form-32), Charges (Form-8, 10, 17, 13)etc.,
have to be filed within the due date from the
events taking place in the company as per the
Companies Act, 1956
Can I inspect a company’s
documents available with RoC
and how?
Yes. You can inspect the documents processed
and registered in the companies document
file for a particular company by paying the
Inspection fee of Rs.50/- per company.
You can see them on portal also
Visit : http://www.mca.gov.in/
Can I obtain a copy of a
company’s document available in
the records with RoC? If so, what
is the procedure for the same?
Yes. A certified copy of the requested
document will be issued on payment of
Rs.25/- per page of document, together with
a formal application and a non-judicial stamp
paper of Rs.10/- for each document.
a) Unpaid dividend,
b) Unpaid Application Money received by

company for allotment of shares,
c) Unpaid matured deposits under section 58A

of the Companies Act, 1956,
d) Unpaid matured debentures,

What are the requirements
regarding appointment of
directors ?
1. obtain the consent (approval) of directors
and submit it to RoC
2. Director to submit undertaking (on stamp
paper) that he would buy qualification shares
3. Particulars of first directors / subsequent
directos appointed should be submitted to
RoC in 30 days of appointment.
What is the role of directors?
They are employees

they are agent of the company
they are trustees of the company
they are officers of the company
Directors powers (only through
directors' meeting)
1. make call on shares

2. issue debenture
3. borow money
4. invest funds of company
5 make loan
Directors powers (only through
directors' meeting) (only at board
1. to fill vacancy in the board (sec 262)
meeting) ?
to sanction contracts in which a director is
interested (sec 297)
to appoint MD / MD when the person is
already an MD in another company (sec.
316, 386)
to invest in companies of the same group (sec.
372)
directors shareholding notice (sec 308)
directors' interest notice (sec 299)
What are the statutory duties of a
director?
1. to file return of allotment in 30 days

to disclose interest (sec. 299, 300)
to disclose receipt from transferee of property /
compensation from transferee of share
to not to issue irredeemable preference share
What are general duties of
directors?
Not to delegate except as per articles /

companies act
not to make secret profit
to take care of the company
to attend board meetings regularly
What are disqualifications for
director? (sec. 274)
Unsound mind
undischarged insolvent
convicted for moral turpitude
calls in arrears for more than 6 month
disqualified by court under sec. 203 due to
fraud etc.
How to remove director ?
Ordinary resolution after special notice (14 day

notice) by shareholders (sec. 284)
Govt may refer the case to company law board
and remove the director on advise of CLB
(388B to E)
Company law board (CLB) – when there is
oppression and mis-management
(397,398,402)
Meetings of director ?
4 meetings in a year, at least 1 meeting in 3
months
Notice (sec. 286) – 7 day written notice to
every director
quorum = 1/3rd member or 2 (whichever is
higher )
if quorum is not present, the meeting is
adjourned forwww.afterschool.tk
5 DECEMBER 09
next week same time. 40
What types of meetings are there ?
Directors meeting
creditors meeting
shareholders meeting
What types of meetings do
shareholders have ?
AGM (annual general meeting)

EGM (Extraordinary general meeting) (sec.
169)
Statutory meeting (sec. 165)
class meeting
What is a proper meeting ?
Properly convened
there must be quorum and chairman
proceedings must be proper
minutes should be prepared
ordinary resolution and special
resolution ?
Ordinary resolution = simple majority (51%)

(sec. 189(1)
SR = 75% majority (sec. 189(2)
What are the matters that require
special notice (sec 190)?
14 day notice to company is required for :
1. appointment / removal of director
2. appointment / removal of auditor
3. to remove a director before his term expire
4. any other matter which require special notice
as per articles / law
the company will inform shareholders at least 7
days before the meeting
What is Foss v/s Harbottle case?
It is about prevention of oppression and

mismanagement in a company
in this case it was held that majority will take
the decisions and only in exceptional cases,
minority can also decide.
Cases, when minority can also
decide ?
1. when ultra vires (beyond the legal powers)
act is done
2 fraud on minority
3. when personal rights of individual members
are infringed
4. where acts requiring special notice and
special resolutions are done with ordinary
resolutions
5. reconstruction / amalgamation (sec. 394)
What to do in case of oppression
and mis management ?
Apply to govt for relief / winding up of

company
Apply to CLB for relief / winding up of
company
Apply to court for winding up of company
Who can apply ? (sec. 399, 401)
At least 100 members
or
1/10th of total members
or
any member holding 1/10 of capital
if there is no share capital :
1/5th of total number of members
govt cal also apply / govt can take application
5 DECEMBER with
09 less number of members also
What can govt. Do ?
Appoint new directors (sec 408)

CLB may ask to change articles and introduce
proportioanal representation
CLB may prevent change in board (sec. 409)
What are the various methods of
winding up ?
1. winding up by court – sec. 433

2. voluntary winding up
a. winding up by members
b. winding up by creditors
3. winding up under supervision of court
When will court order for winding
up of a company (sec. 433)
1. no statutory meeting
2. no commencement of business
3. membership below 7 (2 for private)
4 inability to pay debt
5. just and equitable cause
What is certificate of
incorporation?
If RoC is satisfied about all the documents that
you have submitted (MoA, AoA, Prospectus,
Statutory declaration, Directors
appointment), the RoC will issue certificate
of incorporation (sec.33)
a private comany can now start business, but a
public company will have to obtain
Certificate for commensement of business.
What is Certificate for
commensement of business ?
RoC will grant it only if :

1. directors have purchased qualification shares
2. statutory declarations and prospectus /
statement in lieu of prospectus have been
submittted
3 minimum subscription
What about contract before
certificate of commencement of
business?
All contracts between the date of incorporation
and date of certificate of commencement of
business are provisional and will bind the
company only after certificate of
commencement of business.
If a company doesnt start business in 1 year
from date of incorporation, the court may
order for the wound up of the company
What is doctrine of contructive
notice ?
Every outsider who deals with a company is

supposed to know about its MoA and AoA
any person can go to registrar of companies or
the website and read MoA and AoA of any
company
What is doctrine of indoor
management ?
All those who deal with a company can assume

that provisions of articles have been
followed by the officers of the company
What are the exceptions to the
doctrine of indoor management ?
1. if you know about irregularity in the
company
2. if you are careless and it is your negligence
that you didnt notice violation of company
systems and procedures... if with little efforts
you could have discovered that articles are
not implemented properly, you are taking
decisions at your own risk.
Viewing Company Documents on Portal Rs. 50.00 per
Company
Certified Copy of Company Documents
Certificate of Incorporation Rs. 50.00 per copy
Any other public document Rs. 25.00 per page per
document
Transfer Deeds
Nominal Face value of shares is upto Rs. 5000 Rs. 50.00
per deed
Nominal Face value of shares is more than Rs. 5000 Rs.
100.00 per deed
Efiling Inspection
5 DECEMBER 09
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Companies Act For Entrepreneu

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What are the characteristics of a

A company is different from its members.

Limited liability company

It can work with only 2 directors (sec. 252)

Check availability of name

First check out availability of name on the

You can apply for a name in the prescribed

The minimum authorised capital for Private

Minimum no. of directors for Private Limited

Minimum no. of subscribers for Private

The minimum paid up capital for Private

Minimum subscription for Private Limited

Authorised capital is the capital with which the

The Company can be registered with the

b) Unpaid Application Money received by

c) Unpaid matured deposits under section 58A

d) Unpaid matured debentures,

They are employees

1. make call on shares

1. to file return of allotment in 30 days

Not to delegate except as per articles /

Ordinary resolution after special notice (14 day

AGM (annual general meeting)

Ordinary resolution = simple majority (51%)

It is about prevention of oppression and

Apply to govt for relief / winding up of

Appoint new directors (sec 408)

1. winding up by court – sec. 433

RoC will grant it only if :

Every outsider who deals with a company is

All those who deal with a company can assume

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